Liquity USD (LUSD)

a16z Urges Treasury to Exempt Decentralized Stablecoins From New Rules

Venture firm @a16z has urged the U.S. Treasury to clarify its proposed stablecoin rules under the GENIUS Act and exclude decentralized stablecoins from regulation to promote innovation.

In a Nov. 4 letter to Treasury Secretary Scott Bessent, a16z argued that decentralized assets like $LUSD, backed by @ethereum and governed by smart contracts, lack centralized issuers and shouldn’t fall under Section 3(a)’s restrictions on payment stablecoin issuance.

The firm called the GENIUS Act “a major step for digital finance” but said clear exemptions are needed to support innovation in decentralized finance.

The OG vision of crypto decentralization is struggling:

- Decentralized stablecoins? LUSD is alive yet USDC/USDT dominate the market

- More supply of Bitcoin and ETH moving to ETFs

- DAOs are centralizing (DAO tokens become revenue valued assets)

- Most ICOs require KYC

- Multiple L2s/L1s shut down their chains following Balancer hack

Not all is dark:

- Ethereum's L2s are moving from Stage 0 to Stage 1 decentralization

- Self-custody is still viable for BTC, and ETH despite growing ETF inflows

- DEXs challenging CEXs (perps especially)

- Privacy coins like $ZEC gaining traction

- New solutions like Railgun increase private transactions